Fidelity National Information Services (NYSE:FIS)’s shares sank after it reported fourth-quarter 2022 revenue and earnings that beat expectations but fell short on its outlook for the first quarter of 2023.
The global provider of banking and payments technology solutions, processing services and information-based services said revenue grew by 1% to about $3.7 billion for the three months to December 31, 2022, from a year earlier. Adjusted earnings per share (EPS) for the quarter decreased by 11% to $1.71.
"We delivered fourth-quarter results consistent with our expectations in our Banking and Capital Markets businesses, FIS CEO and president Stephanie Ferris said in a statement. “Revenues and margins in our Merchant Solutions business came under slightly more pressure than anticipated as a result of increasing recessionary impacts in the UK and a shifting of consumer spend from goods to services in the US.”
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For the full-year, revenue improved by 5% to $14.5 billion, supported by its Banking, Merchant and Capital Market Solutions units. Adjusted EPS came in 2% higher at $6.65.
As of December 31, FIS had outstanding debt of $20.1 billion. Fourth-quarter net cash provided by operating activities was approximately $1.1 billion, and free cash flow was $643 million. In the quarter, the company returned $788 million to shareholders through $508 million of share repurchases and $280 million of dividends paid.
The company has guided investors to expect first-quarter 2023 revenue of between $3.375 billion and $3.425 billion. It has forecast adjusted EPS of $1.17 to $1.23. That falls short of a StreetAccount estimate of $3.57 billion in revenue and adjusted EPS of $1.42, according to CNBC.
Planned spin-off
In a separate press release, FIS announced plans for a tax-free spin-off of its Merchant Solutions business. It said the planned separation, which it expects to complete within the next 12 months, will create two independent companies with enhanced strategic and operational focus and enable more tailored capital allocation and investment decisions to unlock growth.
"2023 marks a year of recommitment for FIS, recommitting to our strengths in delivering on our cloud-native and digitally-focused solutions encompassing core, lending, risk, payments and trading platforms to help our clients innovate faster and achieve their growth,” Ferris added. “Our recently communicated Enterprise Transformation Program and this morning's announcement about the planned spin-off of our Merchant Solutions business are two strategic initiatives we are undertaking to improve efficiency, strengthen the strategic and operational focus of the two companies and capitalize on growth opportunities, which in turn will pave the best and highest-potential path forward for FIS shareholders, clients and colleagues."
The company’s stock was 12% down at $65.30 in early afternoon trading in New York.
Contact the author at stephen.gunnion@proactiveinvestors.com